Social Security 2017 Update: Part 2

I just filed at the age of 62. I couldn't wait because I needed the money to help with caring my mother who has dementia. And now with Trump care it looks like there will be many more families having to care for their elderly parents with Medicaid being slashed. It's like a bad dream . I can't believe how unfeeling this administration is to the elderly!!

Thank you for a very helpful, informative explanation of these SS benefit quirks.

Question: On Restricted Benefits, let's assume spouse B wants to file for 50% of Spouse A's retirement. Must either or both of them be FRA (full retirement age) at the time of claiming?

Thanks!

JCarol,
This is my understanding, but would appreciate any members comments.
I am 66. I plan on filing at age 67, which will be in February, 2018.
My wife will be 65 in December. I believe that after I file and start collecting, she will then be eligible to take her spousal SS benefit when she becomes 66.
That spousal benefit will be one half of what I would've gotten at age 66.
She will then let her own SS benefit increase and shift from that spousal benefit to her increased benefit when she becomes 70.
Don't know if that scenario is helpful. I believe it is correct, but we will visit our local SS office to confirm.

Thanks Stevenk,

I rather think this is true, too. We're looking at the opposite strategy. We were going to file on our 65th b-days when we became eligible for Medicare, but now are rethinking it.

I'll likely file on my 65th b-day and my (slightly younger) husband will file on his 66th for half of mine. Since he was the larger earner by about 20%, we'd let his benefits increase by 8% per year for a while. Maybe to 70, maybe not that long. Have to see how our finances and draws against savings/IRAs and minor income spin out.

Hi JCarol
Here is a link from SSA.gov that may be give you some information

https://faq.ssa.gov/link/portal/34011/34019/Article/3754/What-is-the-eligibility-for-Social-Security-spouse-s-benefits-and-my-own-retirement-benefits

Hope this helps!!

I'm 67 in a few weeks and still working FT. I plan to work one more year (my contract was re-upped last week) and claim Social Security (SS) at 68. I went to the local SS office and talked with someone about my options. He said that even if I file for SS, if I continue to work, my SS could be adjusted by the continued contributions I'll be making as an employee. That means the SS distribution (I know it is called a benefit, but is it really? Didn't I put money into the system so that it should be a distribution and not a benefit?) could increase with each successive year that I continue to work. This is a possibility as I may be contracted as a consultant with my current employer at some point, and then I'll be responsible for my own SS contributions. Any ideas on this?

Mandatory withdrawals:
Does anyone have any advice for a strategy to reduce tax penalty on mandatory withdrawals at age 70 1/2 ? This is from 401K's

Editor Comment. The best strategy on RMDs (Required Mandatory Distributions) to avoid taxation is to use them to make your qualified charitable contributions. But you must ask whoever has your money to make the distribution to the charity directly - if it comes to you first it is taxable. https://www.irs.gov/retirement-plans/retirement-plans-faqs-regarding-iras-distributions-withdrawals If your money is in a Roth IRA you are not required to take the IRAs.

Thanks for all the great information. I have been following your information on SS for several years. With that said this is what I understand and plan to due.

I just turned 65 in June and my wife is 63 and started collecting SS at 62 as she retired early at 60 and we needed her SS to cover our expenses until I file a Restricted application when I turn 66 next June 2018. If my plan is correct I should file a Restricted Application for Spousal benefits ONLY next year when I turn 66 in June of 2018. I have two questions on this whole process, what month due I start the process. Due I file 3 months prior to my June 2018 birthday or 3 months prior to July 1, 2018. My second question is if I file for my own SS at age 70 will my wife receive my $2,100 SS amount when I pass or some type of combination of her SS plus a little extra? Thanks!

I worked for SSA for over 39 years. It makes no sense to me that only "file and suspend" was described as a quirk that gamed the system. Filing for a restricted benefit is gaming the system, too. The 8% per year from FRA to age 70 was intended to reward people who worked past FRA and didn't receive SSA benefits of any kind. Unfortunately, the legislation says "not collecting retirement benefits." Removing the reference to retirement was considered by Congress but never done. When Congress dropped the earnings test after FRA in 2000, they also considered dropping the 8%/delayed retirement credit, but didn't. The restricted "strategy" helps people with higher incomes because most lower income people need to take the highest benefit payable and can't afford to "game" the system.

Our strategy is similar to StevenK's. My wife and I are both old enough to take advantage of the Restricted Benefit. I will turn 70 in August of 2018. At that time I will file for my SS benefit. My first payment will be in Sept of that year. My wife turns 66 (her FRA) in Jan. 2019. At that time she will file for her Restricted Benefit and start receiving a spousal benefit (50% of my FRA benefit, not the age 70 benefit) in Feb. When she turns 70 she will file on her own record. At that time the SSA will pay her whichever benefit is higher - on her own record or the spousal. If I die first, she assumes my benefit, which will be higher than hers (because my earning record is higher).
This strategy has the benefit of giving us 2 SS payments starting pretty close to when we file for the first one and then going on for almost 4 years. And by delaying claiming on her own benefit until age 70, she has the chance to maximize her own benefit too.

Do states that tax some retirement income tax distributions from Roth IRAs since they are not taxed federally?

Thank you for your help. My husband is 69 and started receiving his full benefits at age 67. I was born in 1956 and was a homemaker or self employed and as such did not contribute any amount substantial enough to make collecting on my own worth more than a couple of hundred per month. Since there is an 8 year age difference, I plan to file for my spousal SS when I am 62. When my husband passes I would then change to receiving my widows benefit. Your thoughts on this, please. Also if my husband passes before I reach full retirement age, am I able to continue to collect my spousal benefit and wait until I reach my full retirement age to collect a larger payout on my widows benefit? If you can please notify me when this is answered.

On a slightly different note, do you have to go into a social security office to claim widow's/widower's benefits? I plan on claiming widow's benefits at 65, and then waiting to claim my own benefits for awhile.

Kate, my Mom went onto widow benefits at age 60 and I am positive she did it all on the phone. She had no computer and never drove out of our town that has no SS office.

Kate, while people can file online for widow/widower benefits, it's best to file by telephone or in-person to make sure you fully understand your options if you are 62 or older and also eligible for retirement. The 8% delayed retirement credits between FRA and age 70 only apply to the retirement benefit, for example, but sometimes the widow's benefit is so much higher that the 8% won't make a difference. Unless you've already gotten detailed info from an SSA claims rep, file by phone or in-person to make sure you make an informed choice. You can call 1-800-772-1213 from 7 am to 7 pm Monday - Friday to make an appointment for a phone or in-person interview.

Thanks very much! I did call SS and verified that my SS widow's benefit at 65 and my own benefit at 66. If I wait to full retirement age, I'll qualify for the maximum benefit (although in hindsight, I should have traded that all those years in a miserable career for more time with my family or for a job I enjoyed more. Every life decision has pros and cons.) The widow's benefit is $200/mo less than my own benefit, so that's going to be a good option for me.

Dear Jean,

My wife and I both are hard working and have worked over 70 years for SS benefits together. We each never made over $50,000 in any given year. I have the ability to use the Restricted application as my wife had to take SS at 62. My plan is to file for the Restricted application and not take my SS until 70 in hope that my wife will receive a higher amount when I pass. My retirement stops when I pass and the higher SS amount will allow my wife to pay the bills. With that said I don't see us as people with high income or gaming the system.

Well said, Bob & Barb. We're in a similar boat but have no retirement pensions. Savings and SS only, but as we all know, SS ends upon death. We both put into SS for a long time. 91 years and counting between the two of us.

We have pretty strong retirement savings plus term life insurance policies to blunt the loss of that second SS check if one of us passes soon. (We're both in good health, but one never knows.) If we can delay one full check until age 70 by taking half of the other for 4 years, that will ease our situation.

Like B & B, we didn't have high earnings and will receive roughly average benefits. Are we gaming the system? Hardly. Oil companies, Wall Street and big banks game the system. People on SS figure out how to survive.

Hi Bob and Barb:

I am also in the same boat --average earnings and savings is all I will have when I retire. I am divorced and my ex husband of 15 years was a Federal Government Employee under the old system- hired in 1979 and most likely has not paid into Social Security--so I do not know if I will be able to benefit from half of his check--or not. I only have myself to depend on and the divorce and 2008 caused a hit to my savings. I will get average benefits most likely even though my ex made a six figure income. I have never made close to six figures as a nurse.

This is where I have got to ask... what if my wife don't want to file for any benefits until she is 70 yrs old. She is the lower earner, and does not want to quit working. She is 2 yrs older than me... I want to retire at 65 yrs old when she is 67 yrs. What are the pluses and minus of this scenario? Both born after 1955.

Hi William,
You still have several years to look at the ins and outs of SS since you're talking about starting benefits in 2020 or beyond. The SS website's calculators give a good picture of what size checks to expect based on exactly when you begin drawing. https://www.ssa.gov/planners/retire/ is a good place to start.

The longer you delay taking benefits, the higher your monthly check will be. That's the plus. The minus is that you won't be getting money from SS until you start taking the checks. (Duh. I know.) You'll also have to look at how the combination of your wife's earnings plus your SS will affect your income taxes.

Something to consider: As many of us who are just a few years older have learned, when one plans to retire often doesn't coincide with when one actually stops working. There are lots of moving pieces that may bring retirement forward, including health problems, family needs, desire for change, and RAMPANT ageism in the workplace (and elsewhere) that seems to increase exponentially each year after age 50.

One other thing: I know a few couples with one spouse retired and the other still working. It can be a very challenging scenario with both members sometimes resenting the other's status. The working spouse may resent the retiree's freedom and expects the housework, cooking, shopping and other (normally shared) duties to fall on that member. The retiree may resent the anchor placed on his/her retirement by the spouse who still reports to work 5 days a week, 50 weeks a year. That spouse's mental picture of retirement may not have included becoming a full-time housewife / househusband with a limited new life because the spouse declined to stop working.

These issues can be worked out, but 'tis better to go into it with eyes wide open and expectations laid out on the table before proceeding.

I believe if you claim at your full retirement age then she can claim half of yours and then change it to hers at 70.

May not be the best option, mary11, if she wants to continue to work. Both were born after 1955. It is my understanding they would be under the new 'deeming' rules. If she claims a spousal benefit she will be 'deemed' and can not let her own benefit grow until claiming at 70. See the social security website: https://www.ssa.gov/planners/retire/claiming.html
I've found the Maximize software invaluable for comparing different claiming strategies when there are multiple people involved. Seems $40 well spent. There are some small caveats, but it gives you easy reports to compare. It also will show you results of options the software would suggest, if you you want to get the maximum benefit over a lifetime. Each person has to evaluate it considering their own goals.

Thank you, TR, for this article. I somehow never heard of the "Restricted Benefits" filing possibility until reading this blog post.

We did some additional research into that option and have decided to employ this strategy for our SS benefits. We're grateful that you shone some light on it as it will work well for us.

Thanks again!

Per request of JCarol we are moving a string of Comments on File and Suspend/Restricted Benefit here where they fit better:

Can someone shed light on file and suspend Social Security? I started collecting at age 62 1/2, hub at age 63. I know you have to be born in 1953 or later to file and suspend and I was born in 1953. So when I turn 66 I should be able to suspend my SS and collect half of my hubs SS and let mine grow. However, my SS now is more than half of his.

Here is an example of what I am talking about. These are just numbers I chose to use as an example: Let’s say my hub is collecting $2,000 at age 66 and I am collecting $1,500 at age 66. If I were able to collect half of his that would be $1,000 that I would collect that amount for 4 years to age 70 to allow my SS to grow. However, if at age 66 I am making $500 more than the half ($1,000). Would I be eligible to collect his half if I am making more by collecting my SS? I was under the impression if the spouse’s amount is more than the half that it would make the spouse ineligible.

Comment from Editor: We are not Social Security experts, but here is our amateur take on your situation. It is too late for you to take advantage of the file and suspend strategy – if you were not already on that plan as of last year it is too late. We think you are also too late on the restricted benefit. In that scenario if one of you is collecting the second person can claim a restricted benefit (spousal) on the first person, but not take their own benefit until later. But since you are both already collecting on your own, it is too late for that. It is possible that if you have only been collecting for less than a year you could pay back what you have collected and switch. Check with the Social Security office to see what you might be eligible for. See https://www.topretirements.com/blog/financial/social-security-2017-update-part-2.html/ for more

by louise — September 30, 2017 |
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Louise, one option you may take is suspending your benefits at your FRA and reinstating it again at 70. SS will make an adjustment on the amount. I started collecting at 62 and am thinking of suspending at 66, then at 70 there will be an increase of 32%. You can reclaim your benefits anytime between 63 and 70.

by mary11 — October 1, 2017
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Interesting suspending SS at FRA! I never considered it or knew it existed till Mary11 mentioned it. Do many people do this?

by louise — October 1, 2017
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If one was born after January 2, 1954 the file and suspend option has been phased out as far as collecting on a spousal benefit. Too bad for those of us born in 1954 but too late for this benefit. I just has my 63rd birthday on Sept 25–last Monday.

by Jennifer — October 1, 2017
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I am not sure suspending Social Security (SS) for 4 years is really worth it. First I would have to dip into savings to make up for the loss of SS income for 4 years. I did some quick math and I am not seeing a benefit to it. Unless I live to be 90 or 100 years old.

by louise — October 1, 2017

Hi, I wanted to know if anyone has an answer to my Filing a Restricted application question. I turn 66 on June 19th 2018. I'm allowed to file a Restricted application for half of what my wife is currently collecting. My question is what Month should I file the Restricted application and what is the best way to file so that SS does not think I'm trying to file for my own SS.

Thanks,

Bob

Bob - did you ever figure out how to best file for restricted benefits? What has been your experience?

We're only a few months behind you on this so I've got more than a casual interest.

Thanks,
JCarol

Coincidentally I also turn 66 on June 19 and am just going through the process of applying for spousal benefits on my husband's account. I did the online application. There is a question about when to start benefits. I selected June 2018 since that's when I'm eligible. That question also has a part that asks if you are eligible for both retirement and spouse's benefits if you want to delay receipt of retirement benefits. If your desire is to get spousal benefits you need to say yes to that question. It means you're delaying your own benefits. Also, at the end of the application is a comment section. Write in the comment section that you are applying for spousal benefits and the intent is to allow your own benefit to grow. Make sure to add a comment about that so it's on record.

The day after I submitted my online application I got an email saying my application is in progress but that I must submit a Marriage Certification form (found online) by a certain date. Frankly that part of the process has been frustrating. Email didn't say where to send the form. I decided to take it to my local Social Security office and put it in the Dropbox as recommended by a Social Security rep I spoke to. That was more than a week ago but I've gotten no confirmation they have it nor has the status on my record been updated. I've tried leaving messages for someone at that office to call me back with no success. So after talking to someone else at Social Security I decided to send a copy overnight mail and get delivery confirmation. I know it's been delivered this past Thursday morning but it's still not in the system. I spoke to someone else yesterday who finally gave me the name of number of the person handling my application so I plan to call on Monday. FYI, all online applications go through the Boston office. The reason I'm freaking out a bit is I originally submitted my application on 4/2 and the email I got on 4/3 said if they don't have the Marriage Certification by 4/18 my application will be denied. I assume I'll get it taken care of in time, but they really don't make it easy. Good luck.

Maureen, I ended up just going into the SS office and it was well worth the trip. I ended up having 2 sit down sessions and they explained eveything to me and straightened everything out. I wonkt bore you with the nightmare details, but I had tried to deal with SS online and on the phone and they had messed everything up!

Maureen, thank you for that wealth of information. I wasn't sure if we could file on line or needed to go to the SS office. Since I once killed half a day in their offices updating my father-in-law's info when my mother-in-law died, I'm not keen to repeat the experience unless absolutely necessary.